Question
The product is a product for all e-commerce users. Like a Google for Product Search. Monetisation is through affiliate fees on completed sales.
How do I determine size of market?
Almost everyone suggests that you need to look at how many users might pay for this. This is not the model. The product is free. Like google. (I have figured out initial customer acquisition)
I want to know this, How do I identity SAM and SOM?
My TAM is all B2C ecommerce users. Technically this is also my SAM and SOM.
Assuming affiliate profit is 10% per sale, my TAM will be 10% of 1.5 trillion ( size of b2c ecommerce sales) = 150 billion.
In the best case scenario where I can ensure that every ecommerce user uses my product this also becomes by SAM and SOM. I know I should focus on a small-niche-ideal-beachhead-early adopter market right now but why can't my TAM be my SOM?
And what is the difference between SAM and SOM in my case?
Please recommend any good books or articles to help me figure this out. Most resources focus on traditional businesses and don't cover this.
Answer
This is interesting. My specialty is statistics and I love metrics. You could look at online retail metrics. For example, metrics are: average order size, percent of returning customers and percent of new customers. There is average number of items per purchase, and percent of canceled checkouts. There is a wonderful site, kpilibrary.com. It has wonderful metrics. For SOM, metrics are conversion rates for a website, number of retweets and cost per action. For SAM, a KPI is words to sale. Thank you.
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